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Pharm Science,technology and public health

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Title: Pharm Science,technology and public health Author: Annie Cavanagh Last modified by: Julie Depas Created Date: 10/26/2006 12:34:22 PM Document presentation format – PowerPoint PPT presentation

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Title: Pharm Science,technology and public health


1

What is in the Price of Medicines? The costs and
benefits to civil society of the research based
pharmaceutical industry Brussels 26th November
2008
David Taylor Professor of Pharmaceutical and
Public Health Policy, The School of Pharmacy,
University of London
2
This presentation
This contribution discusses issues relating to
Belgian and EU wide public policy on
pharmaceutical pricing and spending. It attempts
to build an understanding of the cost of
medicines today within a broad social and
economic development framework The public has
multiple, sometimes conflicting, interests in
medicines and health care. They range from
ensuring optimally affordable access to existing
treatments to investing in therapeutic and
scientific progress for future generations
Professor Sir Michael Rawlins and Mr Oscar Wilde
A fool knows the price of everything and the
value of nothing."
3
  • Medicines can serve not only as treatments for
    individuals but as stepping stones to overall
    public health improvement. They are atypical high
    technology products. Once developed and
    introduced to the medical market they can
    normally be copied at relatively low cost. In
    economic terms, their supply typically involves
    high sunk costs and low marginal costs of
    production
  • The inherent complexity of many policy issues in
    the pharmaceutical sector can be a barrier to
    balanced public debate. But a failure today to
    value pharmaceuticals appropriately could impose
    very significant costs on twenty first century
    Europe

George Orwell and streptomycin in 1947/48
4
Agenda
  • Medicines in health improvement
  • Pharmaceutical prices and spending in Belgium
  • Issues relating to medicines pricing at the
    European Union and global levels
  • Some suggested topics for further discussion

5
Stages of health development
  • Demographic transition (Warren Thompson, 1929)
  • Epidemiological transition (Abdel Omran, 1972)
  • Care transition, and the processes of social
    adjustment to increased wealth and longevity

King James 1 granting the British Apothecaries
their first Royal Charter in 1617
6
Dimensions of later stage care transition
include..
  • Increasingly assertive consumerism in health care
    greater demands for both personal autonomy and
    medicines safety and effectiveness, even in
    extreme circumstances
  • Decreased tolerance of gross health inequalities,
    and higher expectations of universal care access
  • A shift of aspects of care quality protection
    from professional to regulatory agency and
    managerial control

For sources see, for instance, the work of
Inglehart, Giddens, Sennet, Flynn and Salter
7
In the nineteenth and early twentieth centuries
European health improvement was primarily driven
by better nutrition and factors such as enhanced
sanitation, housing and child care Since the
1940s we have experienced health challenges
associated with wealthy lifestyles,
counterbalanced by the development and use of
presently available medicines The next few
decades should see more effective support for
healthy lifestyles (with a trend towards the
elimination of tobacco use, increased exercise
rates and better diets), coupled with the earlier
and better targeted use of future medicines to
fit the requirements of specific phenotypes
8
Medicines pricing in Belgium
  • Medicine prices are set by the Minister of
    Economic Affairs, and reimbursement levels by the
    Minister of Social Affairs. In most instances
    these are the same
  • When a generic variant of an original medicine
    becomes available because of patent expiry, the
    reimbursement base rate of all forms of the
    original is reduced by 30
  • There is a further 14 price cut when a molecule
    has been reimbursed for more than 12 years and
    additional 2.3 price cut when it has been
    reimbursed for more than 15 years

9
Belgian market outcomes
  • Overall, medicine prices in Belgium are
    whichever way they are calculated close to the
    European average. But within that overall picture
    prices for patented medicines are relatively low
    in international terms, while those for
    off-patent medicines are relatively high
  • There is significant use of off-patent branded
    products, supplied at the reference
    reimbursement (generic price) level
  • The country spends a little over 1 per cent of
    its GDP on pharmaceuticals at manufacturers
    prices, which is in line with OECD average data
  • In per capita terms, Belgium is one of the
    worlds major beneficiaries from pharmaceutical
    exporting and enjoys significant pharmaceutical
    sector investment and employment

10
Health spending in the OECD, 2006
11
Pharmaceutical spending in total health
spendingSource Pharmaceutical pricing in a
global market, OECD, 2008
12
Pharmaceutical spending in Belgium
13
Pharmaceutical retail price componentsSource
Pharmaceutical pricing in a global market, OECD,
2008
14
Retail price levels for medicines, 2005Source
Pharmaceutical pricing in a global market, OECD,
2008
15
Pharmaceutical sector trade balances, 2003
16
According to (2002) Eurobarometer data some 65
of people in Belgium believe their health system
runs well, or is in need of only minor changes.
This compares with an EU average of 44, around
30 in the UK and Italy and 14 in
Portugal. However, more recent EHCI data suggest
that Belgian consumer satisfaction levels may be
declining, in part due to delays in access to new
medicines
17
Issues relating to medicines pricing
internationally
18
The research based pharmaceutical industrys cost
structure an illustrative outline
  • Total production costs 30 per cent of gross
    income?
  • Promotion and information 25 per cent?
  • Research and development 15 - 20 per cent?
  • Other costs 10 - 15 per cent?
  • Profit 10 - 15 per cent?
  • Cost structures vary significantly between
    countries (and companies) because of regulatory
    and other factors. For example, in the UK the
    Pharmaceutical Price Regulation Scheme has
    historically limited promotional and information
    costs to less than 50 per cent of the allowable
    research investment

19
The World Pharmaceutical Market is presently
worth about 500 billion per annum
20
As already noted, innovative medicines typically
have low marginal costs of production relative to
their average costs. Disputes over what a fair
price is can stem from problems such as those
relating to the allocation of research and
development outlays The research based (bio)
pharmaceutical industry has the highest ratio of
research investment to income found in any
sector. It is a major contributor to therapeutic
innovation and bio-scientific development, and a
vital partner for publicly funded
researchers For the research based industrys
business model to remain viable, high investment
risks must be counterbalanced by opportunities
for above average profit. This in turn demands
adequate intellectual property protection
21
Parallel trading, patents and welfare
  • In Europe different national authorities set
    varying medicine price/reimbursement levels. This
    has led to the parallel trading of patented
    (and other) medicines within the EU single
    market
  • There has been debate in the US on the
    desirability of low cost drug re-importation
    from Europe. But this could harm EU public
    interests. Such concerns highlight the complexity
    of issues relating to pharmaceutical intellectual
    property rights and the funding of private (and
    public) sector pharmaceutical research

Byron Dorgan and Olympia Snowe
22
  • In the UK a recent UK Social and Economic
    Research Council study found that although the UK
    is one of Europes largest parallel importers,
    the net impact on the British economy is probably
    negative
  • There is research evidence from the US that
    reducing innovative medicine prices cuts
    research investment in a ratio of around 21
  • Patented medicine prices are above the EU
    average in the US, while those of generic drugs
    are relatively low. High absolute medicine
    spending in the US is also due to high use of
    newer medicines to treat conditions such as
    cancer

Armatya Sen
23
Conflicting pressures on medicine prices and
spending
  • Since the start of the 1950s health spending in
    Western Europe has increased from about 3 to
    around 10 per cent of GDP. Of this total,
    medicine costs typically account for a highly
    visible 10-20 per cent
  • Pharmaceutical research spending has risen
    consistently since the 1950s. But the number of
    marketed innovations has fallen and the age of
    high volume use blockbusters appears to be
    drawing to a close
  • Particularly in EU Member States with weak
    pharmaceutical sectors, governments may subject
    to strong pressures to limit new medicine prices
    in ways which are not necessarily consistent with
    long term national/European public interests

Ernest Solvay and the structure of soda ash
24
  • There is in most markets a growing divergence
    between the prices of patented and non-patented
    medicines
  • All aspects of pharmaceutical research, testing,
    production and promotion are today heavily
    regulated. Nevertheless, it remains inherently
    costly to introduce new treatments and inform
    professionals as to their appropriate usage
  • Despite opportunities for further therapeutic
    gains, the use by agencies such as the UKs NICE
    of incremental cost effectiveness analysis to
    assess the value/affordable price of new
    medicines may, in any given therapeutic area,
    make research on new treatments uneconomic in
    once very low cost generic medicines become
    available

25
Questions for debate
  • To what extent (if any) would Belgian public
    interests be served by changes in pharmaceutical
    pricing that would further decrease the prices of
    off patent medicines relative to patented
    products?
  • To what extent (if any) would Belgian and
    European public interests be served by reforms
    that would reduce pharmaceutical parallel trading
    in Europe, or harmonise EU wide medicines
    pricing?
  • To what extent (if any) would Belgian and
    European public interests be served by reforms
    that could in future increase the duration of
    pharmaceutical patent protection in the EU or
    globally, balanced by appropriate changes in
    pricing and supply strategies?

26
Conclusions
  • To date Belgian approaches to pharmaceutical
    pricing and allied issues appear to have been
    consistent with public interests. But further
    national and/or EU wide reforms will in time be
    required
  • Any future failure to take a constructive
    approach to fostering (bio)pharmaceutical science
    based industry and therapeutic innovation could
    well impose heavy costs on Europeans, and
    ultimately humanity as a whole
  • In the modern context open and constructive
    public dialogue between the all the members of
    the complex network of stakeholders involved in
    pharmaceutical pricing and wider health policy
    formation and implementation is needed to protect
    against damaging errors. Belgium is well placed
    to lead 21st century Europe in this area

27
david.taylor_at_pharmacy.ac.uk
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